INTERNATIONAL FARMER PRICES AND DAIRY PRODUCT PRICES AT RECORD LEVELS

MPO POINTER 2/8 April 2022

In Europe, the average farmer price of unprocessed milk is up by 20%. Indeed, a new price regime developed after numerous price shocks regarding input costs. In the figure below, the price started to behave differently since April 2020, when compared to the typical price cycle of the previous three years. The February 2022 price is a preliminary price, topping €42 per 100 kg.

Figure 1 Average farmer price of unprocessed milk

(source: European Commission)

International product prices for butter, Cheddar, full-cream milk powder, and skimmed milk powder, as published by the United States Department of Agriculture, and converted to rand prices by the MPO (rand price source: the South African Reserve Bank), are at new record levels in rand terms. In relative terms, imports are expensive, and sourcing remains a challenge.

Note: For two of the above dairy products (butter and Cheddar), the price levels in US$ terms are also at new record levels. The price of the remaining two products are not at record levels, but increased, substantially, from January 2016 to March 2022. Skimmed milk powder and full-cream milk powder increased by 165% and by 131%, respectively. The directional trend of US$ prices for the above dairy products, dated 8 April 2022, reflects no signs of stock building or expected stock building as causality of the Russia-Ukraine conflict.

Bertus van Heerden (chief economist, MPO)